Consumer credit reporting has been utilized in America for well over a century. Originally, when everyone in a community knew everyone else, there was little trouble establishing the credit worthiness of individuals. As cities grew and their populations became larger, merchants began calling each of the references given by credit applicants. The number of these calls quickly increased, and entire departments had to be set up to make the inquiries. Soon, a more efficient way to obtain and store credit information became a necessity.
The solution was the establishment of credit repositories or bureaus. Credit repositories give credit granters quick and easy access to credit information from one source, thereby reducing costs to all parties. Credit bureaus serve both the consumer and the credit granting industry. Without a central repository of information maintained by an unbiased organization, neither group would enjoy the benefits of credit.
Credit bureaus realize their income from subscribing creditors, who pay fees to the bureau. In return, the bureau maintains credit files and makes credit information available to its subscribers.
Initially, each small town probably had an independent credit bureau serving the local credit community. As the credit industry grew and consumers became more transient, there developed a need for regional or national sources of information.
Today, there are three, major, national credit reporting systems or repositories:
Thompson, Ramo & Wooldridge (TRW) PA0 Transunion Credit Information Company, Inc. (TU) PA0 Credit Bureau, Inc. (CBI) PA0 Accounts receivable tapes which are regularly sent by credit granters to credit bureaus and used by them to update their files PA0 Manual updates through computer terminals Inquiries made through remote terminals (the repositories use the information given to them in the inquiry to update their files) PA0 Remote teleprompter (these are small terminals that are provided by the repository; the operator types each inquiry while on-line) PA0 CPU to CPU (computer to computer) PA0 Personal computer (with software designed for credit access) PA0 Verbal inquiry (to small credit bureaus that may or may not have their information computerized)
Each of these companies owns credit bureaus and makes computerized credit files available to other, independently owned, subscriber credit bureaus as well. Many of the small town credit bureaus still in existence have an affiliation with one of these national repositories.
Information enters the credit reporting system computers through:
Subscribers to a repository can access information contained in a credit file in a number of ways:
For small credit subscribers, the most common of these accessing methods are remote teleprompters and personal computers. In both cases, the subscriber must dial up and access each repository separately and obtain separate reports from each. A typical inquiry requires that information about the applicant be typed directly into the teleprompter or onto a screen if the subscriber is working with a personal computer program. This information includes the applicant's name, address, social security number, and employer and any previous addresses. In both cases, if an applicant has had a previous residence in another region, the inquiry must be typed and sent separately to a repository for each region. This creates extra labor and a higher margin for error.
Each repository has stronger coverage in some areas than in others. For a variety of reasons, many subscribers report to only one national repository or report only to a local credit bureau. As national repositories purchase local credit bureaus to increase their coverage, one repository may obtain the most complete credit files in an area simply by purchasing the largest local bureau.
Many companies who access credit files subscribe to only one national repository as well. This may preclude them from obtaining the most complete credit report if their applicant lives in a region that may be better covered by another repository. Even though a company may subscribe to more than one national repository, the operator must make a decision (based on the applicant's zip code) as to which national repository has the most complete coverage. This is labor intensive and can have a high error factor as the repositories are constantly updating their files. Even though the repositories send out their own table of who has the best coverage by zip code, it requires labor and inquiry costs on the subscriber's part to run those comparison checks needed to verify the validity of the claims of better coverage made by each national repository.
If the subscriber chooses to access two or more repositories, each must be accessed independently; and separate reports are obtained. These separate reports can be difficult to read together because they are formatted differently and typically contain a number of duplicate tradelines (even within the same report). The operator must manually compare the reports, resolve the duplicates, and obtain the most current information on each tradeline. This obviously increases the labor costs involved in obtaining credit information. Furthermore, the chances for error are significant.